Is a DSO in Your Future?

You want to grow your practice. You’ve been thinking about joining a dental support organization (DSO).  Is a DSO right for you? How will it affect your growth plans? Exit strategy.  In this article, we explore how DSO can benefit or burden small dental practices.  Should you use a DSO as part of your exit strategy?

What is a DSO?

A dental support organization is a company that provides non-clinical business and administrative services to dental practices, allowing dentists to focus on patient care. DSOs handle tasks like human resources, marketing, billing, IT, and supply chain management, enabling practices to become more efficient and potentially improve their work-life balance.

Advantages of using a DSO

• Focus on clinical work: DSOs handle administrative and business tasks, so dentists can focus on providing patient care. 

• Financial and operational stability: DSOs can provide a more predictable income, better benefits, and reduced overhead. 

• Access to technology: DSOs often have the capital to invest in the latest dental equipment and technology, which can improve care delivery. 

• Group purchasing power: DSOs can negotiate lower prices on supplies and equipment due to their large-scale purchasing. 

• Business support: DSOs offer support for things like financing, marketing, and human resources, which can be especially helpful for new dentists or those who don't want to run a business. 

Disadvantages of using a DSO

• Loss of autonomy: Dentists may have less control over clinical decisions, treatment plans, and the overall operations of the practice. 

• Contractual limitations: Contracts can be restrictive, with potential limitations on working hours, the types of insurance plans accepted, or opportunities for future ownership. 

• Culture clash: A DSO's corporate culture may not align with a dentist's personal or practice culture, leading to conflict. 

• Potential for high production demands: Some DSOs may pressure dentists to increase patient volume and production, which can lead to burnout. 

• Staff turnover: A change in ownership to a DSO can sometimes lead to staff turnover and a loss of continuity. 

A DSO and Your Exit Strategy

A well-planned exit strategy offers several key benefits:

• Leaving the practice as a highly efficient and well-documented operation.

• The ability to retain and attract skilled professional and support staff.

• Positioning the practice for future expansion of its client base.

• Allowing the practitioner to exit at a time that aligns with their personal needs.

Dental Support Organizations (DSOs) can play a crucial role in preparing a practice for a smooth transition. They can streamline and document processes, which simplifies the handover for the new owner and facilitates the existing practitioner's departure. The maximal value of a practice is directly linked to its ability to replicate past successes and expand its future cash-generating potential.

However, challenges arise with corporate culture. Existing staff must adapt to new leadership and a different corporate environment. Concerns may surface regarding whether the new corporation prioritizes production over employee well-being, especially given negative perceptions associated with private equity firms.

Furthermore, many DSO contracts tie the final purchase price to the practice's future performance. A perceived decline in the quality of care could lead clients to seek alternative dentists. Similarly, if staff appear anxious or excessively focused on production (e.g., aggressively promoting teeth whitening treatments), clients may become uncomfortable.

For some practitioners, a DSO relationship might seem like an easy solution. They can avoid the hassle of finding a buyer by selling their practice to a DSO, cashing out, and then working fewer hours as an employee. This type of arrangement can be beneficial for many practitioners, provided they negotiate the terms that meet their needs.